An accountable care organization (ACO) established by a private insurer reduced costs of care for Medicare enrollees, a study in Massachusetts found.

by David Pittman David Pittman,Washington Correspondent, MedPage Today
August 27, 2013

An accountable care organization (ACO) established by a private insurer reduced costs of care for Medicare enrollees, a study in Massachusetts found.

Providers participating in the Alternative Quality Contract (AQC) -- an early commercial ACO backed by Blue Cross Blue Shield of Massachusetts -- reduced spending on Medicare beneficiaries by 3.4% after 2 years compared with enrollee costs at nonparticipating providers, researchers reported in Wednesday's Journal of the American Medical Association.

However, the program didn't consistently improve quality of care for Medicare patients, Michael McWilliams, MD, PhD, of Harvard Medical School, and colleagues found.

Participants in the AQC reported adopting several across-the-board strategies that affected care for all their patients, including those in Medicare as well as those in private plans, the authors noted. For example, providers rewarded physicians or groups for efficient practices, changed referral patterns, engaged in high-risk case management, and redesigned care processes to eliminate waste. But the researchers couldn't tie Medicare savings to specific AQC interventions.

McWilliams and colleagues compared Medicare enrollees served by 11 provider groups in the AQC from 2007-2010 with Medicare patients served by non-AQC providers. The study looked at quarterly medical spending and five quality measures, such as avoidable hospitalizations and 30-day readmissions.

The AQC started in 2009 with providers bearing a financial risk for spending in excess of a global budget, gaining from spending below the budget, and receiving rewards for meeting performance targets.

"The incentives in the AQC are similar to those in 2-sided payment arrangements that all ACOs in Medicare programs are expected to accept by their second contract period if not earlier," the study authors said.

Per-enrollee spending was $150 higher for patients of AQC providers than for those of non-AQC providers before the ACO took effect in 2009; spending in both groups had been increasing at similar rates.

Year-1 savings weren't significant (P=0.18), but by year 2, the AQC lowered Medicare beneficiary spending by 3.4% and the difference in spending between the AQC and non-AQC providers had dropped to $51 (P=0.02), the study found.

Savings came from reductions in outpatient services, including office visits, emergency department visits, minor procedures, imaging, and lab tests. Also, savings were greater in patients with five or more conditions (P=0.002).

Previous research showed the AQC reduced quarterly spending on Blue Cross patients by $27 per enrollee in year two.

In the present study, performance on quality measures didn't change significantly between the two groups, the authors reported.

McWilliams said the findings should signal a willingness for provider organizations to enter into similar contracts with additional insurers and accelerate providers' rapid transition to ACOs.

"They could be rewarded for the savings contracts with additional insurers," the authors wrote. "Conversely, cost-reducing spillovers present a free-riding problem to commercial insurers engaged in ACO contracts, since competing insurers with similar provider networks could offer lower premiums without incurring the costs of managing an ACO."

There were several limitations to the study, including existing risk-based contracts held by AQC providers.

"Participating organizations could have concurrently implemented unrelated interventions to improve care efficiency for all patients,"they wrote.

Also, medical spending for Medicare patients varied much greatly than for the commercially insured.

"The growth and proliferation of accountable care initiatives has continued unabated over the last 12 months," Leavitt said in a report this month. "The broad adoption of accountable care paired with the emergence of preliminary results has provided some clarity to the overall accountable care movement."

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